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Alphabet: Is it the next Apple?

Apple won’t be the biggest tech forever. After doing my homework I reckon Alphabet is the company most likely to succeed it.

Article updated: 16 November 2018 8:00am Author: Michael Baxter

The opportunity

PwC projects that AI will boost the global economy by $15 trillion by 2030. McKinsey projects a $13 trillion boost over that same period.

In a recent report McKinsey stated: “Almost half the activities people are paid — almost $16 trillion in wages — to do in the global economy have the potential to be automated by adapting currently demonstrated technology, according to our analysis of more than 2,000 work activities across 800 occupations. While less than five per cent of all occupations can be automated entirely using demonstrated technologies, about 60 per cent of all occupations have at least 30 per cent of constituent activities that could be automated. More occupations will change than will be automated away.”

I am not going to get into the debate about whether tech will destroy jobs, the short answer is that it is complicated.

But it seems highly likely to me that the world’s biggest company in a few years time will be the one that masters AI and other automation related technologies such as the Internet of Things and Robotic Process Automation.

The list of potential contenders is long. I suspect there will be more than one winner, but no more than a handful. The first, second and third largest companies in the world by 2030 will be the ones that provide the technology that leads the way in this automation revolution. It is hard to say for sure how much each of these largest companies will be worth, but I reckon $2 trillion is a conservative estimate.

Actually, automation related companies do have a rival for leading the list of the world’s biggest companies — it is possible that big data companies will occupy the top slots — and if that is the case, such a company will almost certainly come out of China.

But here are the firms: mainly US based, with a smattering of European, including British, that are contenders to come out top in the AI arms race.

Number one: Alphabet

Alphabet: I put this company at number one because it actually has more than one reason. DeepMind, the British subsidiary of Alphabet was behind Alpha Go, the AI system that did what was previously considered impossible and defeated the world’s best player at the Chinese game of Go. Most experts seem to agree that the company leads the world in AI research. It is not without controversy. Only this week, Alphabet has been accused of breaking privacy commitments by integrating the data DeepMind has acquired from the NHS into the larger Alphabet family.

But Google itself is also a pioneer in AI. It’s research independent of DeepMind is among the best in the world — Google Brain for example. The company has acquired 12 AI startups in recent years.

The rest of the big techs

The other giant techs are all working on AI too. So that’s Apple, Amazon, Facebook and Microsoft. I would put Microsoft in poll position, ahead of Amazon, then Apple and then Facebook. I reckon that it will be business applications of AI that will see the highest value, and Microsoft edges it. Amazon is a big player in the Cloud too, but I am so impressed with the way Satya Nadella has turned the company around. It’s a world leading player in the cloud, AI and augmented reality.

I currently believe that Amazon feels like a business close to peak. I reserve the right to change my mind, but to me, Amazon feels like a company that is so big in the retail space that it is in danger of being disrupted.

Apple is a superb company, I am just not sure that the biggest winner over the next ten years will be a hardware company. It’s got more money to throw at AI than anyone, but it just isn’t quite up there with Microsoft in creating an automation revolution.

Facebook has quite simply got problems. The younger users are just not using it like they used to, and while it also owns Instagram I am not convinced. It also has major privacy related challenges to overcome.

The next tier

But there are also some very interesting smaller — but still large — companies in this space. From this second tier, I would put SalesForce and Tesla at the top of the pack. SalesForce is the dominate player in cloud services but also a heavy investor in AI. Tesla, is leading in AI related to autonomous cars.

Start-ups

There are other contenders.

But it is quite possible that the next superstar is not even listed on the stock market yet. There are many players in this space. Two companies that seem especially interesting are UiPath, a company that has seen phenomenal growth in just a few years and seems to be setting the pace in robotic process automation. And in the UK, Darktrace is applying AI in the fight against cyber crime. But there are many others, a handful, such as BluePrism are listed on the stock market. Other contenders include Brain Corporation, Dataminr, CrowdStrike and if you are interested in companies with a British flavour: Graphcore.

To invest in such companies one route might be to invest in funds, such as Woodford Patient Capital Trust, which invests in some companies in this space. Or maybe you just want to watch closely and strike when and if an IPO occurs.

China

But I should say that I have focused on non-Chinese companies in this article. China is fast moving ahead of the US in the AI race; a point that bears on the Chinese economy overlook. As far as the fourth industrial revolution is concerned, China sits at number one. Investing into China is super risky and not at all easy; but investing in funds that do focus on China may be a safer route. Funds such as Fidelity China, might be a better route, although I would get very excited if a decent retail fund emerged that specialised in Chinese AI, or indeed, just AI.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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